A Loan-to-Value (LTV) ratio is one of the most important factors to consider when applying for a loan against property because the amount of money you can receive is determined by your property’s Loan-to-Value ratio. To know better you must first know about loan to value ratio in detail. A Loan-to-Value is expressed as a percentage, and it determines the loan value you are eligible to receive as the lender’s approved loan amount. 

A lender will typically approve between 50 and 70% of your property’s current market value, and several factors are considered when determining this percentage. The lender will conduct a thorough property inspection to confirm the ownership and details of your property. A residential property will receive a higher Loan-to-Value ratio because it has a higher resale value, and if your residential property is located in a desirable neighborhood with modern amenities, is new, and is well maintained, you can expect a Loan-to-Value ratio of up to 70%. 

For example, if the lender approves a 60% LTV ratio and your property is worth Rs. 1 crore, you can borrow Rs. 60 lakhs.

Here’s how to figure out your Loan-to-Value ratio:

To calculate your Loan-to-Value ratio manually, use the formula below.

LTV Ratio % = Borrowed Amount / Value of the Property x 100

There are online Loan-to-Value calculators that can assist you in establishing in a more efficient manner while avoiding any human errors. A Loan-to-Value ratio calculator includes the following information:

• Employment Type
• Property Value
• Property Type
• Tenor Period 
• Interest Rate 

Step 1: Go to one of the numerous online LTV calculators available.

Step 2: Determine whether you want to work for yourself or for someone else.

Step 3: Determine whether you want a residential or commercial property.

Step 4: Enter the current market value of your property.

Step 5: Enter your current monthly obligations, income, appropriate interest rate, and preferred repayment term.

Step 6: Enter the following information, and the calculator will calculate your Loan-to-Value ratio percentage.

Here are the Reserve Bank of India (RBI) guidelines on Loan-to-Value Ratio:

• For amounts of Rs.30 Lakh, lenders can sanction up to 90% of the property’s value.
• Lenders can approve up to 80% of the property’s value for sums ranging from Rs.30 Lakh to Rs.75 Lakh.
• If the Home Loan amount exceeds Rs.75 Lakh, lenders will only sanction up to 75% of the property’s value.